Thursday, June 23, 2011

Brussels Sprouts, 1 Euro

Last week, I was able to take a delightful day trip into Brussels, Belgium. As the European capital for waffles, chocolate, and the Parliament of the European Union (EU), there was lots to see! Since more things to do means more economic applications, Brussels was a magical place.

I got to speak with an intern at the World Youth Alliance (WYA), a non-government organization (NGO) that lobbies at the EU about the euro (€)*. You'll notice that my last post referenced some of the positive aspects of the euro, mostly in comparison to the atrocious inflation of the dollar ($). Talking with the WYA intern was really interesting, because she's Italian and has experienced the switch to the euro firsthand. She spoke about how it's really helpful for smaller countries to be able to join the EU and enter something so stable. The flipside of that is that more stable countries (like France and Germany) have to bail out less stable countries (like Greece) because they're tied to the same currency.

From a more practical, day-to-day aspect, the euro makes life in the EU much simpler. With a common currency, trade and travel are both significantly easier. Instead of having to gamble on exchange rates, or go to the bank only to find out that it's Pentecost Monday and so you can't change money, you just buy and sell and ride trains like normal. This is something the US discovered in the early days of the Articles of Confederation. If every state issues its own money, it significantly weakens the power of the collective body. The US eventually abandoned the Articles in favor of a more centralized Constitution (though still much less centralized than our government today). The fifty US states all share a common currency that makes travel and trade between them much easier. The euro also comes with these benefits, but with a less-defined federalism between the EU and the sovereign nations within it.

This is one of the fascinating things about economics. Something that most people consider really boring, like currency, actually has huge political ramifications and daily implications. Joining the EU is supposed to mean using the euro (though Great Britain is still holding out). Using the euro means committing to a currency that will suffer when other nations suffer (or spend beyond their means) and will thrive when they thrive. It's a gamble. In exchange for this political uncertainty, your nation is granted all the ease of conducting business on a single currency, which translates into time saved for your people. If you're France though, and have had to bail out Greece even while your own books are in shambles, there's certainly less appeal. As the world financial situation continues to be bleak, it will be interesting to see whether the euro will survive. If it does, it will almost certainly come with a more powerful EU that means less sovereignty for member nations. If it does not, Europe will be in the middle of a serious identity crisis. Common currency is like man-capris: it may seem like a good idea at first, but it's hard to undo after it's played out.